Bega Cheese Limited (ASX:BGA) shareholders should be happy to see the share price up 17% in the last quarter. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 18% in the last three years, falling well short of the market return.
Check out our latest analysis for Bega Cheese
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the three years that the share price fell, Bega Cheese's earnings per share (EPS) dropped by 29% each year. This fall in the EPS is worse than the 6.5% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. With a P/E ratio of 71.20, it's fair to say the market sees a brighter future for the business.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Bega Cheese's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Bega Cheese's TSR for the last 3 years was -13%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Bega Cheese shareholders have received a total shareholder return of 2.3% over the last year. And that does include the dividend. However, that falls short of the 2.9% TSR per annum it has made for shareholders, each year, over five years. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 3 warning signs for Bega Cheese that you should be aware of.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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